Social Security’s 2026 cost-of-living adjustment (COLA) is expected to be around 2.5%, according to early estimates. This would match the modest increase seen in 2025. If confirmed in October, after the Bureau of Labor Statistics releases inflation data for July through September, this COLA would keep monthly benefits rising slightly above the long-term average.
Crucially, a 2.5% COLA could finally push the typical retired-worker benefit above $2,000 per month for the first time ever. “On a nominal basis, the 2026 COLA should make history by pushing the average monthly retired-worker check above $2,000 for the first time,” Nasdaq points out. However, this milestone has mixed implications.
While breaking the $2,000 threshold is significant, the COLA might not keep pace with the actual cost of living for seniors. Housing and medical care costs, the two biggest expense categories for older Americans, continue to rise faster than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) used to calculate COLAs.
Projected COLA impact on benefits
Nasdaq notes that while the COLA may reach 2.3-2.5%, shelter costs increased by about 4-4.4%, and medical-care inflation hovered around 2.7-3%. As a result, even with a larger monthly check, many retirees are likely to see their purchasing power shrink. The Senior Citizens League (TSCL) and independent analysts have repeatedly pointed out that the CPI-W reflects the spending patterns of urban, wage-earning workers. These non-seniors spend more heavily on health and housing.
This mismatch means that COLAs often understate the true inflation experienced by older Americans. Additionally, evolving economic pressures, such as lingering tariffs or a shrinking Bureau of Labor Statistics data-collection network, could shift the final COLA up or down before the October announcement. If the final COLA exceeds the roughly 2.2% projected by the Social Security Board of Trustees, it could accelerate the depletion of trust fund reserves, potentially moving forward the program’s insolvency threshold.
Looking ahead, a 2.5% or even 2.3% COLA in January 2026 would mark a milestone by lifting average benefits over $2,000 per month. Yet, it’s also likely to fall short of the real inflation costs for key senior expenses. Unless policymakers shift to a more senior-sensitive inflation index or adjust benefit formulas, retirees risk seeing their rising checks evaporate due to skyrocketing costs.